There’s nothing more gratifying than looking at your business’ balance sheet and seeing your net profits are climbing. But once you’ve gained significant returns on your business, what exactly should you do with them? Should you take your profits and use them to increase your net worth? Or should you reinvest them in your business to take it even further?
At the end of the day, there’s nothing wrong with having your own way with your hard-earned business profits. However, you can easily multiply your profits by investing them in securities that can diversify your income stream and generate passive income. This way, your money can work harder for you with even less effort.
In this post, we’ll discuss some investment vehicles that you should consider reinvesting your business profits in.
In the past year, the average selling price of a Canadian home has increased by more than 38%. Indeed, real estate property prices continue to rise despite the pandemic, due to low mortgage rates and high confidence in the housing market. Because of this, there’s never been a better time for both regular individuals and business owners to buy investment-grade property. While real estate investments aren’t as liquid as other investments, they often offer the chance for immediate profit and passive income if you choose to lease or rent your property. What’s more, real estate properties can also be of use to your business, especially if it can be converted into a warehouse, office, or data center.
When we hear about stocks, we often think about investing in individual stocks that promise high returns over an extended period of time. However, dividend stocks are a fantastic opportunity for business owners who want to diversify their income streams. Simply put, a dividend stock offers regular payments on profits to individual investors. This investment is a great way to grow their profits, as some companies offer at least 1 to 3 percent in dividend yield to their stockholders. Take note, however, that the value of stocks can fluctuate every day. As such, it’s important to pay close attention to your dividend stocks and pull them out once the market shows bearish tendencies.
For business owners who are risk-aversive but want to place their trust in other industries and securities, reinvesting profits in gold may be a good idea. For one, gold has long been considered a safe and reliable investment, as its price rarely experiences dramatic swings. However, direct gold investments (or physically owning gold) aren’t always practical — since you’ll need to figure out how to store it, secure it, and pay exorbitant dealer fees. For this reason, it might be better to invest in gold-derivatives such as gold ETFs. In a nutshell, gold ETFs are investment vehicles that allow you to speculate and invest in gold price movements, without having to own any actual gold. They are similar to index funds that tie related assets, such as mining company stocks to physical gold, together. If you want to invest your profits in a tangible and solid investment vehicle, gold is the way to go.
If you want to increase the mileage of your business profits and diversify your income streams, reinvesting them in securities can be well worth the trouble. For more small business advice and insights, be sure to check our other posts here on York Link.
Exclusively written for yorklink.ca by Jessica Brand